How much will next year’s incoming Fuel duty rise hit operating margins for taxi drivers?
- Perry Richardson
- 1 day ago
- 2 min read
Taxi drivers covering around 2,500 miles each month are likely to face a noticeable increase in running costs once fuel duty begins to rise next September.
The reversal of the 5p per litre discount introduced in 2022, coupled with the recent climb in pump prices, is expected to place further strain on operators already managing higher insurance, maintenance and finance expenses.
Based on current averages, a typical diesel taxi returning around 35 to 40 miles per gallon will consume between 280 and 320 litres of fuel over a 2,500-mile month. At today’s average diesel price of 146.57p per litre, that equates to roughly £410 to £470 in monthly fuel spending. Should duty return to its pre-cut level, the cost per litre will rise by at least 5p, adding a further £14 to £16 per month for drivers at unchanged pump prices.
Although these amounts vary by fleet, vehicle type and driving conditions, drivers will point out that even small per-litre shifts add up rapidly at higher mileage. Fuel is one of the most significant operating costs outside of financing and insurance, meaning sustained increases often reduce weekly earnings unless fares adjust in line with inflation and fuel conditions.
Higher pump prices and next year’s duty increase expected to feed into fare-setting calculations across the trade
Local authorities review metered tariffs using formulas that factor in inflation, fuel prices and wider operating costs. When fuel rises persist for an extended period, licensing bodies tend to incorporate the higher baseline into their next tariff review. This protects driver viability but can lead to upward adjustments in passenger fares. The process is typically evidence based, relying on cost indexes and industry submissions, and changes are usually implemented only after public consultation and committee approval.
If pump prices remain elevated into the first half of 2026, pressure is likely to build for tariff revisions across a number of licensing areas. Drivers argue that without periodic recalibration, real-term earnings erode and fleet turnover slows, affecting service reliability. For passengers, this raises the prospect of incremental fare rises that reflect broader inflationary conditions rather than short-term volatility.
Cabbies will be monitoring the duty increase closely as they plan cash flow for the next financial year. With wholesale movements unpredictable and a higher tax floor now scheduled, fuel efficiency and vehicle choice are expected to become more prominent considerations for taxi drivers aiming to maintain margins.
